U.S.

GAAP compared to Indian GAAP

1. Content and form of financial statements Companies are required to present balance sheets, profit and loss accounts and, if listed, proposing listing or having turnover greater than Rs. 500 million, cash flows, for two years together with accounting policies, schedules and notes. The format of the financial statements generally follows the requirements of the Companies Act. All companies are required to present balance sheets, income statements, statements of shareholders equity, comprehensive income and cash flows, together with accounting policies and notes to the financial statements. Disclosures in the notes to financial statements generally are far more extensive than under Indian Accounting Standards. No specific format is mandated; generally items are presented on the face of the balance sheet in decreasing order of liquidity. Income statement items may be presented using a single-step or a multiple- step format. Securities Exchange Commission (SEC) registrants are generally required to present two years of balance sheets and three years for all other statements. 2. Asset revaluation and impairment An increase in net book value arising on revaluation of fixed assets is normally credited directly to equity under the heading Revaluation Reserve and is not available for distribution until realized. A decrease net book value arising on revaluation of fixed assets is expensed except that to the extent that such a decrease relates to previous increase on revaluation it may be charged against that earlier increase. Where depreciable assets are revalued, the depreciation expense is based on the revalued amount and on the remaining useful lives of such assets. The ICAI has recently issued AS-28 Impairment of Assets, which becomes effective for periods commencing April 1, 2004 and is mandatory for certain enterprises including listed public companies. The standard requires companies to assess whether there is any indication that an asset is impaired at each balance sheet date. If such an indication exists, the company is required to estimate the recoverable amount of the asset. If the recoverable amount of an asset is less than its carrying amount, that carrying amount of the asset should be reduced to its recoverable amount. That reduction is an impairment loss. As the standard is becoming mandatory with effect from April 1, 2005, companies are not presently required to carry out the assessment of Impairment of Assets. No upward revaluation of any class of fixed assets is permitted. In June 2001, the FASB issued FASB issued SFAS No.143, Asset Retirement Obligations SFAS No.143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the longlived asset. In October 2001, the FASB issued SFAS No.144, Accounting for the Impairment or Disposal of Long Lived Assets which supersedes SFAS No.121, Accounting for the Impairment of the Long-Lived Assets to be Disposed Of. SFAS No.144 applies to all long lived assets, including discontinued operations and consequently amends APB opinion No.30, Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 develops one accounting model for longlived assets that there are to be disposed of by sale, as well as addresses the principal implementation issues. SFAS No.144 requires that the long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. The impairment Review is based on undiscounted cash flows at the lowest level of independent cash flows. If the undiscounted cash flows less than the carrying amount, the impairment loss must be measured using discounted cash flows.

3. Intangible assets

AS-26 on Intangible Assets became effective in respect of expenditure incurred on intangible items during accounting periods commencing on or after April 1, 2003, in respect of listed public companies. The standard differentiates between intangible items and intangible assets, whereby intangible items are expensed and intangible assets should be recognized if, and only if (a) it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise, and (b) the cost of the asset can be measured reliably. 4. Investments in securities Investments are classified as long-term or current. Current investments are readily realizable, not intended to be held for more than one year from the date of purchase and are carried at the lower of cost or fair market value. Unrealized losses are charged to the income statement; unrealized gains are not recorded except to restore previously recorded unrealized gains that may have reversed. A long-term investment is an investment other than a current investment and is valued at cost, subject to a write- down for impairment on permanent diminution in value. Long term investments are classified as trade and other. 5. Borrowing costs and interest capitalized Borrowing costs directly attributable to the acquisition, construction, or production of a qualifying asset are capitalized as a cost of that asset. Other borrowings cost are recognized as an expense in the period in which they are incurred. Foreign exchange gains or losses relating to borrowings incurred to construct fixed assets are treated as a part of borrowing costs during the construction period.

Purchased intangibles are capitalized at their fair value. Costs relating to internally developed intangible assets are expensed when incurred. Intangible assets with definite lives are amortized over the expected period of benefit. Intangible assets with indefinite lives are not amortized but are subject to an annual impairment test, or more frequently in the event of a triggering event.

Investments in marketable equity securities and all debt securities are classified according to managements holding intent, into one of the following categories: trading, available for sale, or held to maturity. Available-for-sale securities are marked to fair value, with the resulting unrealized gain or loss recorded directly in a separate component of equity until realized, at which time the gain or loss is reported in income. Held on maturity debt securities are carried at amortized cost. Other than temporary impairments in the value of HTM and AFS investments are accounted for as realized losses.

Interest cost is capitalized as part of the cost of an asset that is constructed or produced for an enterprises own use. The capitalization period begins when activities commence to make ready of the assets, and ends when the asset is ready for use. The capitalized interest is expensed over the estimated useful life of the asset as part of the depreciation charge. All foreign exchange gains and losses are included in net income. Origination or commitment fees incurred to obtain a borrowing are treated as a deferred charge and amortized using the effective interest method over the life of the debt.

6. Deferred taxes Deferred tax liability or asset is recognized for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognized and carried forward to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. 7. Retirement benefits The liability for defined benefit plans like gratuity and pension is determined as per actuarial valuation. The actuarial gains or shortfall are recognized immediately in the Profit and Loss account. Liabilities for leave encashment to employees are accounted for on accrual basis. The liability of defined benefit scheme is determined using the projected unit actuarial method. The discount rate for obligations is based on market yields of high quality corporate bonds. The plan assets are measured using fair value or using discounted cash flows if market prices are unavailable. The actuarial gains or losses are not recognized immediately in the statement of income. As a minimum, amortization of an unrecognized net gain or loss is included as a component of net pension cost A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carry forwards. A valuation allowance is raised against a deferred asset where it is more likely than not that some portion of deferred tax assets will not be realized.

for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10% of the greater of the projected benefit obligation or the market -related value of plan assets. The balance, if any, is amortized over the average remaining service period of active employees expected to receive benefits under the plan. Leave salary benefit is provided on actual basis. 8. Depreciation Depreciation is generally charged at Rates prescribed by the Companies Act. 9. Prior period items and changes in accounting policies Impact of change in accounting policies and prior period items are reported on a prospective basis beginning with year of change. 10. Proposed dividend Proposed dividends are reflected in the financial statements of the year to which they relate even though proposed or declared after the year end. 11. Foreign exchange AS-11 The Effects of Changes in Foreign Exchange Rates deals with accounting for foreign exchange transactions. Transactions in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Monetary items are restated at year-end exchange rates. Exchange differences arising on transactions of monetary items are recognized as income or expense in the year in which they arise. With the revision of this standard with effect from accounting periods commencing on or after April 1, 2004, exchange differences arising in respect of liabilities for the acquisition of fixed assets are also recognized as income or expense in the year in which they arise. 12. Revenue Recognition In a transaction involving the sale of goods, revenue is recognized when significant risks and rewards of ownership are transferred and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. Dividends from investments in shares are recognized when the owners right to receive payment is established. Revenues involving the sale of goods are recognized when all of the following criteria have been met: 1. Persuasive evidence of an arrangement exists, 2. Delivery has occurred or services have been rendered, 3. The sellers price to the buyer is fixed or determinable and 4. Collectibility is reasonably assured. In addition revenues may be recognized when the selling party is a principal to a transaction, which is based on an evaluation of the facts, including whether the party has high pricing authority, inventory risk and credit risk. All gains and losses arising from foreign currency transactions are included in determining net income. Dividends are charged to retained earnings at the point of time that they are formally declared by the board of directors. Prior period items are accounted by adjusting to prior years and retained profits. Depreciation is provided in a systematic and rational manner over the useful economic life of the assets.

13. Off-balance sheet items

An enterprise should disclose for each class of contingent liability at balance sheet date, a brief description of the nature of the contingent liability in terms of accounting standard 29. The amount of capital commitment is also to be disclosed.

SEC registrants are required to provide extensive disclosures of material off-balance sheet items, contingent liabilities and financial guarantees. Commitments and contingencies are required to be disclosed. FASB interpretation No. 45 (or FIN 45), guarantors accounting and disclosure requirements for guarantees, including indirect guarantees of indebtness of others, requires that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, market value of the obligations it assumes under that guarantee. FIN 45 applicable on a prospective basis to guarantees issued or modified after December 31, 2002.

14. Related party disclosures Disclosures by public sector companies of related party transactions with other public sector companies do not need to be provided. 15. Segments Specified segment disclosures are provided which could either be business segments or geographical segments. Segments information is provided for reportable segments based on the segments for which the chief operating decision maker allocates resources and measures performance. The amount to be disclosed corresponds to the measures of performance used by the chief operating decision maker. Related parties would include all entities under common control (including government departments). and there is no specific exemption for public sector or government owned entities.

16. Discontinuing operations The ICAI has issued AS 24 which is mandatory for accounting periods commencing on or after April 1, 2004, for listed public companies. The disclosure of pre-tax profit or loss from ordinary activities attributable to discontinuing operations during the financial reporting period and the income-tax expense related thereto, as well as the amount of pre-tax gain or loss recognized on disposal of assets or settlement of liabilities attributable to discontinuing operations would become necessary in financial statements prepared from that date. Consequently, there is no separate disclosure of discontinuing operations in the financial statements. In October 2001, the FASB issued SFAS No.144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.144 applies to all long-lived assets, including discontinued operations, and consequently amends APB Opinion No. 30, Reporting the Results of Operations Reporting the Effects of Disposal of a Segment of a Business and Extra ordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No.144 expands the scope of discontinued operations to include all components of an entity with operations that: 1. can be distinguished from the rest of the entity, and 2. will be eliminated from the ongoing operations of the entity in a disposal transaction. SFAS No.144 also amends Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Previously, a liability for an exit cost was recognized at the date of an entitys commitment to an exit plan.

This statement also establishes that fair value is the objective for initial measurement of the liability. SFAS146 is effective for exit or disposal activities that are initiated after December 31, 2002.